4 Reasons You Should Contribute to Your 401(k) Even If There's No Match

Many employees are fortunate enough to work for a company that offers a 401(k) retirement plan with employer matching. However, some companies do not offer employer matching, and as a result, some workers may question whether it's worth contributing to their 401(k) in these cases. The answer is a resounding yes! Even if your company doesn't offer to match, there are plenty of reasons to contribute to your 401(k). Here are four of them.

Reason #1: You'll Get a Tax Break

The first reason to contribute to your 401(k), even if there's no employer match, is that you'll get a tax break. Your contributions to a 401(k) are made pre-tax, which means you'll reduce your taxable income for the year by the amount you contribute. For example, you earn $50,000 per year and contribute $4,000 to your 401(k). Your taxable income for the year will now be $46,000. This can result in substantial savings come tax time.

Reason #2: You May Be Eligible for the Saver's Credit 

The second reason to contribute to your 401(k), even if there's no employer match, is that you may be eligible for the Saver's Credit. The Saver's Credit is a tax credit available to low- and moderate-income taxpayers who make qualifying contributions to their retirement accounts. To be eligible for the credit, your modified adjusted gross income (MAGI) must be below certain thresholds, which vary depending on filing status. For example, the MAGI threshold for married couples filing jointly is $64,000; for heads of household, it's $48,000; and for single filers and married couples filing separately, it’s $32,000.

Reason #3: Employer Matching Is Not the Only Way to Grow Your Savings 

Many people believe that employer matching is the only way to grow their retirement savings—but this simply isn't true. Even if your company doesn't offer employer matching, your savings will still grow over time thanks to compound interest. Compound interest occurs when the interest you've earned on your investment is reinvested and begins earning interest itself. This "snowball effect" can help your savings grow exponentially over time—even without employer matching!

Reason #4: You Can Always Withdraw the Money If You Need To

Although it's generally not advisable to raid your retirement account early, one of the great things about a 401(k) is that you can always withdraw the money if you need to—although you will likely have to pay taxes and penalties on any withdrawals made before age 59½. So, if you find yourself in a tough spot financially down the road and need access to some quick cash, at least you'll know that your 401(k) funds are there for you—no matter what!

401(k) plans are one of the simplest and most effective ways to save for retirement—even if your company doesn't offer employer matching. Thanks to tax breaks and compound interest, contributing to a 401(k) can help ensure a comfortable retirement regardless of whether or not your employer offers matching funds. So don't wait—start contributing today!